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Kenya is now the cheapest country to purchase diesel in Eastern Africa

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Kenya is now the cheapest country to purchase diesel in Eastern Africa

Culled from Businessdailyafrica

By John Mutua

 

SUMMARY

  • A litre of the commodity costs Sh112.63 on average in Kenya, compared to Sh118.44, Sh139.08 and Sh149.91 in three of the six East African Community countries, Tanzania, Uganda and Burundi, respectively.
  • This bucks a trend where Kenya has had the costliest super petrol and diesel in the region mainly due to relatively high taxes and levies.
  • The shift in the market structure is linked to the introduction of monthly subsidies in Kenya, which cut the current diesel prices by Sh23.29 a litre.

Diesel prices in Kenya are the lowest in eastern Africa in the wake of the monthly subsidy, reversing the market structure that made the country’s fuel the most costly in the region.

A litre of the commodity costs Sh112.63 on average in Kenya, compared to Sh118.44, Sh139.08 and Sh149.91 in three of the six East African Community countries, Tanzania, Uganda and Burundi, respectively.

This bucks a trend where Kenya has had the costliest super petrol and diesel in the region mainly due to relatively high taxes and levies, which encourage local motorists in border towns to fuel in the neighbouring countries.

The shift in the market structure is linked to the introduction of monthly subsidies in Kenya, which cut the current diesel prices by Sh23.29 a litre.

“The big difference is mainly attributed to the subsidy that the government has been using,” said an official at the Energy and Petroleum Regulatory Authority (Epra).

Kenya introduced the subsidy on April 14 last year as part of efforts to defuse simmering public anger over the high cost of basic items.

The subsidy has kept pump prices unchanged for the fourth month in a row despite a jump in the cost of shipping the refined fuel.

It is supported by billions of shillings raised from fuel consumers through the petroleum development levy, which was increased to Sh5.40 a litre in July 2020 from Sh0.40, a 1,250 percent rise.

The fund cushions consumers from volatility in fuel prices but has also seen motorists lose out when paying the Sh5.40 for a litre at the pump.

Tanzania is the only country in the region with cheaper super petrol than Kenya, according to the pricing list on GlobalPetrolPrices.com — a site that tracks fuel prices globally.

A litre of super petrol is averaging Sh131.63 in Kenya while in Tanzania it is going for Sh125.2. Uganda has the costliest super petrol in the region at Sh158.1 per litre followed by Burundi at Sh152.85.

In September last year, Kenya had the most expensive super petrol in the region at Sh134.72 per litre, while the commodity retailed at Sh131 in Uganda. It was the cheapest in Tanzania at Sh115.26. The relatively high cost in Kenya was linked to taxes and levies.

There are seven levies and two taxes that Epra takes into account when setting fuel prices, which have been blamed for the high cost of petroleum products. The levies accounted for nearly half of current petrol costs, shifting the spotlight to taxation of petroleum products.

Tanzania scrapped a Sh4.90 ($0.043) levy charged per litre of fuel in a bid to lower fuel prices from the start of this month.

Kenya’s fuel subsidy has been crippled in the wake of the Russia-Ukraine war that pushed crude oil prices to levels seen more than 10 years ago.

Government sources say the Treasury will struggle to pay oil marketers more than Sh25 billion over the next two months to keep pump prices unchanged despite a jump in the cost of shipping the commodity.

The current fuel being consumed in Kenya is based on the average crude oil prices of $82.03 a barrel, and the monthly review set for next Tuesday at $92.

Oil prices have jumped more than 30 per cent since 24 February, touching $139 a barrel at one point this week.

The oil price had fallen back to about $106 a barrel at one point on Wednesday, but by Thursday morning it was trading at around $116.

Officials at the energy regulator Epra reckon that the Treasury would require at least Sh10 billion this month and another Sh15 billion in April to compensate oil marketers and keep local pump prices unchanged.

With the fund supporting the subsidy exhausted, the Treasury will struggle to pay the marketers billions of shillings at a time when it’s faced with rising spending pressure from critical items like the August General Election and Covid-19 vaccines.

jmutua@ke.nationmedia.com

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IMF Chief, Ceyla Pazarbasioglu, to visit China over Africa’s growing debt profile

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As the debt profile of many African countries continues to rise, the International Monetary Fund strategy chief, Ceyla Pazarbasioglu will travel to China next week for another high-level meeting.

Her travel is part of efforts to press the world’s largest sovereign creditor for quicker progress on debt restructurings for countries in need.

The IMF chief had called for debt restructuring arrangements for Zambia and Chad to be completed shortly.

Pazarbasioglu said it was critical to move forward and that “outreach to China next week is very important, at the highest levels.”

“It’s moving – very slowly, but it’s moving,” Pazarbasioglu said, noting that the participation of mining company Glencore Plc in the Chad treatment was also “a very good sign” that “even the most difficult private sector participants” were participating.

She said the Paris Club of official bilateral creditors had taken years to hammer out their debt relief processes, and China was learning, although she noted that the debt issues facing borrowing countries now were acute.

“The problem we have is that we don’t have that time right now because these countries are very fragile and dealing with debt vulnerabilities,” she said. “What we need is speed.”

Pazarbasioglu said the IMF would continue to press for changes to the Common Framework, including a freeze in debt payments when countries apply for a debt treatment, as well as clearer procedures and timelines for action, and ensuring comparable treatment for private creditors.

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Botswana central bank predicts fall of inflation rates, maintains monetary policy

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Botswana’s central bank has predicted that the country’s inflation rate will gradually fall back within its target range by 2024.

The bank is predicting that inflation will fall back within the 3%-6% range in the third quarter of 2024. The prediction has made it keep its monetary policy rate unchanged at 2.65% on Thursday.

The bank’s governor, Moses Pelaelo while speaking at a news conference said “the domestic economy will continue to perform below capacity in the medium term and therefore not pose any inflationary pressures.”

The inflation rate in the Southern African country dipped to 13.1% year on year in October from 13.8% in September but is still far above the central bank’s 3%-6% preferred band.

“The drop in inflation in the past months is due to the dissipating effects of previous increases in administered prices,” Pelaelo said.

According to the World Bank, Botswana’s reliance on diamonds and a public sector-driven model makes the economy vulnerable to external shocks, as diamonds contribute over 80% of total exports and are a major source of fiscal revenues.

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